Market Profile

for Food and Beverages

in Japan

While every effort is made to ensure the accuracy of the information contained herein, New Zealand Trade and Enterprise, its officers,
employees and agents accept no liability for any errors or omissions or any opinion expressed, and no responsibility is accepted with
respect to the standing of any firms, companies or individuals mentioned, or if the world economic conditions have changed since the
research was undertaken. New Zealand Trade and Enterprise reserves the right to reuse any general market information contained in
its reports.
1.0 MARKET STRUCTURE

1.1 Size

The Japanese food and beverage (F&B) market is the second largest in the world behind the
United States. In 2007 the food retail sector was worth around US$325.3 billion1, with the
Hotel Restaurant and Institutional (HRI) food service sector worth US$260 billion.2

Overall, it is a mature market and Japanese consumers have relatively high incomes, and
therefore the means to choose products of high quality and value. Japanese spending on
food accounts for around 17.5 percent of total household expenditure, which is higher than in
many other OECD countries. This reflects the demands for high quality products by
Japanese consumers, and also the high percentage of foods that are imported. 3 According
to Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) 60 percent of the country’s
food requirements (on a calorie basis) are supplied by imports.

Within Asia, only China and South Korea consume more vegetables per capita than Japan.
Japan is the world’s largest importer of seafood products – highlighting the importance of
fish in the national diet. Consumption of meat, at just under 36kg per capita, is still
considerably below that of many western countries.3

Supermarkets account for 37.4 percent of the food retail sector revenue. The sector is
fragmented and is characterised by a large number of general and specialty stores, and local
grocery stores. There are also a number of consumer co-operatives, which represent an
alternative to conventional retail stores. These co-operatives allow consumers to buy directly
from wholesalers or producers, with an estimated 60 percent of Japanese farms selling to
these co-operatives.1

Large supermarkets and conventional supermarkets accounted for 19 percent of the retail
food market with sales of US$70 billion in 2007. There has been some consolidation of
supermarket brands and store numbers as price competition has become more intense.4

The food service sector is dominated by restaurants (which have a 41 percent share of the
sector, followed by bars and coffee shops (17 percent), institutions (12 percent), and hotels
(10 percent).2 However, the foodservice sector is suffering from the changing demographic
structure. The declining working age population and the rise of the over 60 age group,
means that people are eating out less in restaurants and company/school cafeterias.

1.2 Growth rate and trends

With the population and income levels remaining steady over recent years, food retail sales
have been shrinking since 2003 with a compound annual growth rate of -0.8 percent for the
years 2003 –2007.1 However, Japan’s population is becoming older with 20 percent of the
population aged 65 or over, which is the highest ratio in the world. The aging population will

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have a significant effect on the F&B market, and over the next decade Japan is likely to
become a value-driven rather than volume driven F&B market.

Partly as a result of demographic changes one of the latest trends has been an increasing
demand for functional, healthy foods, such as foods that are nutrient enriched, lower
cholesterol, can improve circulation, and are additive free. Food safety is also very important
in the Japanese market, and consumers are sensitive to ‘clean’ and ‘ethical’ food issues.2

There has also been a growth in sales of packaged or ‘consumer ready’ food products as
family patterns change, particularly with more women entering the workforce. This has led to
a rise in the popularity of convenience stores, which provide a range of fresh, processed and
ready-to-eat products.

With the increasing number of single member households among the population, consumer
demand is also moving towards smaller portion packaging. Because consumers prefer to
shop almost every day for groceries in small amounts, smaller portion packaging is
becoming increasingly popular as the average household size shrinks.

1.3 Known factors influencing growth rate

The global economic recession is beginning to impact the Japanese economy. One of the
effects of the recession has been a downward pressure on consumer prices which have
dropped by 2 percent over 2008.5

Most industry experts are predicting that the Japanese food service sector will see a
downward trend because of the recent negative economic forecasts. However, it is expected
that certain segments will perform better than others, in particular, the fast food category,
including coffee stands, noodle shops and rice bowl stands, which attract consumers with
lower menu prices.1

2.0 COMPETITIVE ENVIRONMENT

2.1 Major players in the market

2.1.1 International6

The United States and China are the largest exporters of F&B products to Japan, accounting
for 40 percent of Japan’s F&B imports in 2008. The main products imported from the United
States were corn, soybeans, pork and wheat. These products account for 63 percent of
Japan’s F&B imports from the United States.

The main imports from China are prepared or preserved chicken and pig meat, prepared or
preserved fish, crustaceans and molluscs, and prepared vegetables. These products
accounted for 25 percent of Japan’s F&B imports from China.

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While imports from countries such as the United States, Australia, Canada and European
states have remained relatively steady, imports from neighbouring countries such, Thailand,
Philippines and Vietnam have been growing steadily in recent years while F&B imports from
China have dropped by 10 percent.

2.1.2 Imports from New Zealand

In 2008 New Zealand was Japan’s 8th largest source of F&B products, with imports worth
NZ$1.8 billion, an increase 19 percent from 2007. The following table shows the top 10
imports over the last two years:

Product 2007 (millions of NZ$) 2008 (millions of NZ$)

Cheese 225 283.3
Kiwifruit 210 262
Frozen beef 128 124
Casein 51.5 87
Food preparations, n.e.s. 50 81
Fresh curd and whey 46 62
Fresh vegetables 62 60
Chilled beef 54.5 58
Sauces, mixed condiments, etc 47 57
Total F&B imports 1.5 billion 1.8 billion
n.e.s. = not elsewhere specified
Source: World Trade Atlas (CIF Japan base)

2.1.3 Domestic market

Although dominated by supermarkets, the retail market in Japan is very fragmented, with the
top five players holding a total market share of 13 percent. Some of the major companies
operating in the food retail sector are:7

• Seven Eleven Japan - The company is a subsidiary of Seven and I Holdings and
operates franchised and company owned convenience stores. It is the country's largest
convenience store operator with more than 12,094 stores in Japan. It is headquartered in
Tokyo and has about 5,294 employees.
• Aeon Co., Ltd. - Aeon operates retail stores, general merchandise stores, specialty
stores, retail stores, and also develops shopping centres, and leases and manages
commercial facilities in Japan. Aeon operates through its 129 consolidated subsidiaries
and 28 affiliated companies.
• Lawson, Inc. - Lawson operates convenience stores, which offer general foods such as
prepared dishes, noodles and snacks, deli and bakery goods. As of February 2007,
Lawson operates a total of 8,564 convenience stores throughout Japan and 286 stores
in Shanghai, China.
• Daiei, Inc. - Daiei is now part of the Aeon group. Daiei operates about 3,000 stores
through franchises and subsidiaries. Its retail division comprises general merchandise
stores, supermarkets, discount stores, convenience stores, department stores and
specialty stores for clothing and sundry goods.8

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2.2 Marketing Strategies

With so many competing new products being launched in the market, companies should be
aware of the need for constant product innovation and regular launches of new or improved
products, especially for processed foods. Also, regular promotion and advertising is needed
to maintain sales.

The Japanese consumers easily get bored with old products and demand the best quality,
the best looking, and the latest products. Japanese consumers are well-educated and
knowledgeable about food, and are highly brand-conscious - a brand with a quality image
will sell.

Japanese consumers also often view food as art. A food product’s aesthetic appearance (on
the shelf, in the package, and on the table) is very important in building consumer
acceptance.7

2.3 Distribution Channels

The typical distribution pattern for imported products has been for the importer to import
goods from foreign manufacturers and distribute them to primary wholesalers, which in turn
distribute through secondary wholesalers to retailers.

However, leading retailers and wholesalers are now relying more on development imports,
while Japanese manufacturers import goods from their own offshore production facilities.
Small and medium-sized wholesalers and retailers do small-lot imports, and consumers are
increasingly importing products directly from abroad themselves. This has resulted in
distribution channels that are shorter and more efficient than Japan’s traditional channels.

Overall, factors such as diversified consumer needs, intense price competition and the
spread of the internet are dramatically altering the environment for distribution of imported
products.

3.0 REGULATORY OVERVIEW

3.1 Ministry of Health, Labour and Welfare (MHLW)

The Food Sanitation Law is the major law under the control of the Ministry of Health, Labour
and Welfare (MHLW). The Food Safety Basic Law sets the principles for developing a food
safety regime and the role of the Food Safety Commission (FSC), a food related risk
assessment body. The Food Sanitation Law ensures the safety and sanitation of foods. In
order to maintain the safety and sanitation of foods, general requirements and standards
have been set for all food types, as well as individual requirements for 35 kinds of foods. The
Food Sanitation Law also prescribes the standards for foods, additives, food apparatus and
container packages, and certain toys. The Law is available in English on the Japan External
Trade Organisation (JETRO) website:

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www.jetro.go.jp/en/market/regulations/pdf/food-e.pdf (as of Apr 2006)

The following website contains the abstracts of Specifications and Standards for Foods,
Food Additives, etc under the Food Sanitation Law (dated Apr 2006)
www.jetro.go.jp/en/market/regulations/pdf/testing-e.pdf

Imported foods that do not meet these requirements will not be allowed entry. It is strongly
recommended that in the event that a product label does not clearly indicate additives,
preservatives, colouring materials, spices or flavourings, that a certificate with detailed
descriptions of the ingredients etc be attached to each shipment in order to meet import
procedures. Details of the food importing procedure are shown on the MHLW website:
www.mhlw.go.jp/english/topics/importedfoods/1.html

On the Japan External Trade Organization (JETRO) website there are a number of other
documents that provide information on regulations and standards for food and beverages:
www.jetro.go.jp/en/market/regulations/

These include:
• Handbook for Agricultural and Fishery Products Import Regulations, Mar 2008
• Specifications and Standards for Foods, Food Additives, etc. Under The Food Sanitation
Law, Mar 2007

3.1.1 Labelling

Labelling Required by MHLW: The label should include in Japanese the following
information:
• Name of product
• Ingredients (in descending order of weight percentage); food additives
• Expiry date
• Method of use, storage instructions, etc
• Country of origin
• Name of importer/distributor
• Labelling of biotechnology ingredients (please visit the MHLW website)
www.mhlw.go.jp/english/topics/qa/gm-food/index.html
• Allergen labelling (please visit the MHLW website for information on potential allergens)
• www.mhlw.go.jp/english/topics/qa/allergies/index.html

3.1.2 Food Additives

MHLW requires a safety assessment for food additives. Only additives which are designated
by the MHLW as approved are permitted for use. The Japanese approved food additive list
shows the additives that are approved for use in foodstuffs, the purpose that the additive
must be used for in the product (eg, preservative, antioxidant, etc), and the foods that the
additives are allowed to be used in, and the maximum tolerances allowed in the food. For a
full list of approved additives, approved uses, and tolerances, please visit the following
website: www.mhlw.go.jp/english/topics/foodsafety/foodadditives/index.html

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 3.1.3 Maximum Residue Levels

In May 2006 the government implemented new regulations on the maximum levels for
residues of agricultural chemicals, feed additives and veterinary drugs in food. To implement
the new regulation, Japan’s Ministry of Health, Labour and Welfare (MHLW) announced the
provisional maximum residue level (MRL) for 758 agricultural chemicals in addition to around
10,000 existing official MRLs. Together they make up the “positive list”.

Foods containing residues exceeding the MRL levels on the positive list are regarded as
violations of the Food Sanitation Law and are rejected at the port. Information about the
positive list system, including the actual MRLs, can be found on MHLW’s webpage in
English at: www.mhlw.go.jp/english/topics/foodsafety/positivelist060228/index.html

3.1.4 Poisonous and Detrimental Substances

Some foods naturally contain substances detrimental to the human body, and some others
are contaminated with detrimental substances or germs during their manufacturing process.
Therefore in the inspection of food imports, careful examinations are made with concern to
the following items:
• Aflatoxin B (peanut, peanut products, nuts, spices)
• Poisonous fish (shellfish, ciguatera, wax containing fish)
• Shellfish poison (diarrhoea poison and paralytic poison of bivalves)
• Cyanogen (butter beans, white beans, etc)
• Methanol (distilled liquors)
• Gossypol (cottonseed, other than those used for oil extraction)
• Salmonella (for meat eaten raw)
• Listeria (some types of unpasteurised cheeses)
• Trichina (game meat)
• Radioactive substances (food imports from European regions)
• Decomposed or deteriorated foods

3.1.5 Health Certificate for Meat and Meat Products

It is essential that meat as well as raw materials for meat products is obtained from healthy
animals, and not from diseased or dead ones. Therefore, meat imports (limited to those
obtained from oxen, pigs, horses, sheep, goats, water buffalos, and poultry) and meat
products using them as raw materials should be accompanied by health certificates issued
by NZMAF.

3.1.6 Standards for Apparatus and Container Packages

It is assumed that tableware, apparatus such as cooking utensils, and container-packages

for foods should be non harmful and in a sanitary condition. They should also meet certain
requirements and standards set for apparatus and container-packages.

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 3.1.7 Ministerial Ordinance Concerning Compositional Standards for Milk
and Milk Products

Milk and milk products are regulated, separately from other foods, based on the Food
Sanitation Law. The Ordinance covers not only specifications for individual products and
testing methods, but also specifications for containers and packages of milk and milk
products.

Before exporting a new or unknown product to Japan, MHLW suggests that the Japanese
importer submits a small sample of the product to be imported to the MHLW inspectors’
office with a certificate certifying compliance with required product regulations. These
samples should be inspected to ensure that no importation problems exist before the product
is commercially imported into Japan.

3.2 Ministry of Agriculture, Forestry and Fisheries (MAFF)

MAFF is also involved in food risk management, mainly in the area of food labelling under
the Japan Agricultural Standards (JAS) Law, and animal & plant health protection, through a
series of quarantine laws. The Plant Quarantine Law requires a phytosanitary certificate to
assure that the product and carton is pest-free. Information about Japan’s phytosanitary
requirements is available on the Biosecurity New Zealand website:
www.biosecurity.govt.nz/files/regs/stds/icprs/japan.pdf

MAFF is also responsible for organic food production standards through the JAS Law. The
organic foods regulations are shown on the MAFF website:
www.maff.go.jp/soshiki/syokuhin/hinshitu/e_label/index.htm

3.2.1 Labelling Requirements by MAFF

Separate from labelling requirements under the MHLW Food Sanitation Law (see section
3.1) MAFF requires manufacturers to label their products in accordance with quality labelling
standards established under the Standardised Quality Labelling System of the JAS Law.

The revised JAS Law requires labelling of the following, in addition to the existing
requirements under the original JAS Law:
1) name of product
2) name of ingredients
3) net weight or volume
4) minimum expiry date
5) method of preservation

3.3 OTHER REGULATIONS AND REQUIREMENTS

NZ Laboratories Certified by the Japanese Government

Some New Zealand products will not need to be tested upon arrival into Japan if an
analytical certificate accompanies the shipment from a laboratory approved by the MHLW. A
full list of MHLW’s approved NZ laboratories are provided on the MHLW website:
www.mhlw.go.jp/topics/yunyu/5/dl/n1.pdf

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Import Quota Items (IQ) in Food Sectors
There are some items which apply to import quota, especially in HS codes 03 (including
herring, codfish, scallop, mackerel, squid, sardines, pollock, etc); 12 (cannabis leaf/plant,
seaweed, etc); and 13 (cannabis resin, opium, etc). In addition to these, items such as rice,
wheat, corn for industrial use, dairy, etc apply to tariff-quota systems.

Measurement Law
The objective of this law is to designate standards for measurement.

Beef Safeguard
Japan’s beef safeguard was negotiated during the Uruguay Round to afford protection to
domestic producers in the event of an import surge. The safeguard is triggered when imports
increase by more than 17 percent from the previous Japanese Fiscal Year on a cumulative
quarterly basis. Once triggered, the safeguard remains in place for the rest of the fiscal year.

The Beef Traceability Law (The Law for Special Measures Concerning the Management and
Relay of Information for Individual Identification of Cattle)
The Beef Traceability Law became effective from 1 December 2003. The Law aims at
dissolving consumer unease about the safety of beef. But, it does not deal with imported
beef.

Law for Promotion of Effective Utilization of Resources / Containers and Packaging

Recycling Law
Under the Law, specific containers and packaging are subject to identifier labelling
provisions, in order to promote sorted collection.

The Food Safety Commission (FSC)

FSC is the organisation that undertakes risk assessment, and is independent from risk
management organisations such as MHLW and MAFF. FSC’s three main objectives are:
• Conduct risk assessment on food in a scientific, independent, and fair manner, and
making recommendations to relevant ministries based upon the results from the risk
assessment.
• Implement risk communication among stakeholders such as consumers and food related
business operators.
• Respond to food-borne accidents and emergencies.

Product Liability Law

The Product Liability (PL) Law, which was enacted in 1995, covers cases of bodily injury or
physical damage (broader damage) other than the product in question due to a lack of safety
in the product. In the case of injury or damage caused by the failure of the product, liability
will generally be with the importer, who could in turn seek compensation from the
manufacturer.

Health Improvement Law

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The Law regulates the performance of a National Nutrition Survey, the establishment of the
Nutrition Consultation Offices and appointment of Nutrition Instructors, and the supervision
of nutrition at institutions with dining facilities. It also governs permission or approval for the
labelling of specific foods such as nutritional supplements, products specifically suited for
consumption by infants, medical patients, or other special-care individuals.

Taxes
(1) Customs Duties: Varies according to customs tariff codes.
(2) Consumption Tax: (CIF + Customs duty) x 5%

The Liquor Tax Law subjects all forms of liquors (beverages with an alcohol content of 1% or
higher) based on categories and alcohol content. Consumption tax on liquors is calculated
as: (CIF + Customs duty + Liquor tax) x 5%.

4.0 MARKET ENTRY CONSIDERATIONS

4.1 Possible points of Differentiation for NZ companies

Japanese consumers appreciate foods produced in a certain region that is known to produce
quality products, and are more receptive to concepts like PDO (protected designation of
origin) or PGI, (protected geographical indication) and New Zealand exporters should take
advantage of this attribute. Some examples of New Zealand products that would fall into this
category are kiwifruit, avocado oil and wines.

Over the long term, there is room for growth in new value-added products such as innovative
functional food and beverages (eg. fatigue prevention drinks).

4.2 Tactical questions on market entry

The following are questions to address when formulating a market entry strategy:
• Do you have export experience?
• Are you able to re-formulate the product if needed?
• Do you have the resources to meet market requirements (quick responses, product
development, time, money, etc.)?
• Are you able to provide samples on a timely basis?
• Are you patient? (most Japanese companies will start with only a small order)
• Can you guarantee consistency of supply of your product and service?
• Are you able to determine if your product category can currently be imported into Japan?
• Can you determine the import classification and possible tariff rate for your product?
Some of the products containing dairy ingredients, for example, are still highly protected
by the Japanese government and face either prohibitively high tariffs or quota barriers.
• Can you provide a preliminary analysis of the market, such as competitiveness, similar
types of products, size of the opportunity, differentiation points, packaging etc?
• Are you prepared to visit Japan to meet with potential customers?

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As section 2 indicates, Japan has extensive F&B regulations which can be difficult to
understand. As a result, having a knowledgeable Japanese partner could immensely save
time in the product development stage, and when introducing a product to the market.

4.3 Recommendations on long term strategic issues for exporters to

consider

Exporters looking to make a long-term commitment to Japan should set up a presence in the
local market by hiring staff who know the local market, who can formulate an effective
marketing plan, and who can be delegated the authority to implement such a plan.

The Japanese value trust, dialogue and relationships, and New Zealand exporters should
make considerable efforts to avoid establishing a poor reputation. Short term thinking,
ignorance of local values, or near-sighted decisions will damage chances of long term
success in Japan.

4.4 Sustainability issues

4.4.1 Consumers

Pew’s Global Attitudes Survey conducted in 2007 found that 70 percent of consumers in
Japan named environmental concerns as a major problem.9

The Japanese Ministry of Agriculture, Forestry and Fisheries conducted a survey in 2004
which found 42 percent of consumers prefer to buy green, with 94 percent likely to buy green
in the future.10

Japanese consumers’ environmental awareness extends to ethical and fair-trade products.

Datamonitor forecasts that fair trade purchase will increase by 12 percent over the next five
years.11

4.4.2 Retail

Aeon Group Supermarkets provide special traceability labels on products to enable

customers to check production information on their mobile phones. The company introduced
biodegradable packaging for many fresh produce items in 2005.12 Aeon has been reporting
on social and environmental matters since 1996. Aeon also has a code of conduct for their
suppliers which include environmentally friendly manufacturing processes. Aeon auditors
check both local and overseas suppliers annually. 13

Wal-Mart acquired Seiyu Supermarkets in 2007. Seiyu is one of the largest supermarket
chains in Japan with a total of 394 stores. Seiyu began a carbon reduction programme and a
reusable bag campaign in 2007. Wal-Mart is continuing to integrate sustainable practices
into its stores worldwide and into its supply chain. 14

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 4.4.3 Organics

Japanese consumers are concerned about food safety and this has increased demand for
organically certified foods. Food processors are increasing the production of organic foods
under the “Organic Guild” brand and supermarket chains Aeon and Ito-Yokada are
expanding their range of organic products. 15

5.0 MARKET RESOURCES

5.1 Government

Ministry of Health, Labour and Welfare - www.mhlw.go.jp

Ministry of Agriculture, Forestry and Fisheries - www.maff.go.jp
Ministry of Economic, Trade and Industry - www.meti.go.jp
Japan Customs - www.customs.go.jp
JETRO (Japan External Trade Organisation) - www.jetro.go.jp

5.2 Industry

Agriculture & Livestock Industries Corporation - alic.lin.go.jp

Japan Fish Traders Association - www.jfta-or.jp
Japan Imported Cheese Promotion Association - www.jic.gr.jp
Japan Dairy Industry Association - www.jdia.or.jp
The Japan Soft Drinks Association - www.j-sda.or.jp
The Mineralwater Association of Japan - www.minekyo.jp/
Japan Frozen Food Association - www.reishokukyo.or.jp
Japan Fresh Produce Import and Safety Association - www.fruits-nisseikyo.or.jp
Japan Health Food & Nutrition Food Association - www.jhnfa.org
Japan Food Additives Association - www.jafa.gr.jp

5.3 Trade publications

Nikkei Net Interactive

www.nni.nikkei.co.jp/

Japanese English Language Newspapers/Magazines

www.world-newspapers.com/japan.html

5.4 Trade events

Foodex Japan - held in Makuhari Messe every year in March

www2.jma.or.jp/foodex/en/index.html

Health Ingredients Japan - held in Tokyo every year in October

www.hijapan.info/en/index.html

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Supermarket Trade Show - held in Tokyo every year in February/March \
www.smts.jp/english/ IFIA Japan

Tokyo Health Show - held in Tokyo every year in February

www.this.ne.jp/eng/index.html

Prepared by: New Zealand Trade and Enterprise, April 2009

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1
Datamonitor. Food Retail in Japan : Industry Profile. July 2008.
2
USDA. Foreign Agricultural Service. Japan HRI Food Service Sector Report 2009. March 2009.
3
Economist Intelligence Unit. Food, Beverages and Tobacco Industry Forecast, February 2009.
4
USDA. Foreign Agricultural Service. Japan Retail Food Sector Annual Report 2008. Nov. 2008.
5
Economist Intelligence Unit. Japan Economy : the incredible shrinking economy, 3 April 2009.
6
Import statistics sourced from the World Trade Atlas.
7
USDA. Foreign Agricultural Service. Japan Exporter Guide 2008. October 2008.
8
Datamonitor. Company Profiles Database.
9
Pew. 47-Nation Pew Global Attitudes Survey, June 2007.
http:// pewglobal.org/reports/pdf/256.pdf
10
Japanese Organic Producers Have Difficulty Meeting Demand for Green Food. 10 October 2007.
www.freshplaza.com/news_detail.asp?id=9155
11
Datamonitor. The Next Step in the Ethical Consumerism Revolution. February 2008.
12
AEON. Annual Report 2007. www.aeon.info/en/
13
AEON. Environment Report. 2006, Chapter 4. www.aeon.info/en/environment/report/2006/e_04.pdf
14
Wal-Mart website - www.walmartstores.com/Sustainability/7951.aspx
15
USDA. Foreign Agricultural Service. Japan – Food Business Line. 2007
www.fas.usda.gov/gainfiles/200709/146292320.pdf

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